RE: Calif, Kazfan nice discussion thereJagdipdave and ybbdbb,
I base my price projections on LME forward curves (data for 27 months) assuming that in two consequent years the price will reach its long term average.
0.65 USD is something I got from Brooke Hunt's analysis 2004, corrected with 20% for dollar weakening againts other major currencies and somewhat escalated mining costs.
Admittably that is conservative, but I have hard time to believe much greater prices because of two things:
1. Majors have been holding back brownfield expansions to avoid overinvesting that has happened before. If prices hold, they can expand production of any mine that has over 20 year mine life.
2. If you use heftier price, say 0.85 USD for zinc and run NPV for any junior miner, you end up with 5-10-bagger. When whole sector is discounted like that, I become wary.
"For cost economics to come in play for pricing, the cost you have to factor is marginal cost, cost of top decile.(If 10% production goes offline, the price will correct itself) So 0.65 price means that worst 10% prices would be in range of 0.30-0.35. Is that the case?"
About marginal costs, If I remember correctly prices bottom when 25% of production is not ecomomical anymore (and maybe 10% goes offline).
I've seen the chart that summarized C3 cost of producing mines and I think worst 10% was higher than 30-35 cents. Maybe 40-45.
Can't remember exactly.
Try BN.V for near time producer. NPV-wise (with above mentioned price projections) it is 2 times undervalued.